1. The consultants estimated the required rate of return was 13.635%
2. The Beta of Poorside's equity was 0.7, the market return was 20% and the risk-free rate was 12%
3. The interest rate on debentures was 13% per annum
4. Debt items were recorded at market values
a. Mortgage loan: $1,500,000
b. Debentures: $2,500,000
5. Share capital had a market value of $6,000,000
6. The consultants believed the capital structure was optimal
7. The corporate tax rate was 40%
Calculate the before-tax rate of interest on the mortgage loan required to arrive at the estimate of the required rate of return.